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Goldman Sachs: March 2009

Traders "Unwinding" AIG: "We Have Never Done As Big Or As Profitable Trades -- Ever"

Moe Tkacik | March 30, 2009, 5:28PM

What's it like, the laborious job of "unwinding" hundreds of thousands of mind-numbingly complex derivatives contracts amassed over the years by the inimitable AIG Financial Products? Ask the Wall Street investment banks to whom they've been farming out the work -- it's so painful and time-consuming it feels like the old days, especially the "massively profitable" part. An anonymous derivatives trader tells the blog Zero Hedge:

During Jan/Feb AIG would call up and just ask for complete unwind prices from the credit desk in the relevant jurisdiction. These were not single deal unwinds as are typically more price transparent - these were whole portfolio unwinds.The size of these unwinds were enormous, the quotes I have heard were "we have never done as big or as profitable trades - ever".

Sort of undermines the notion that AIGFP employees needed retention bonuses so that the Great Unwinding might be an "orderly" and modest process conducted by cool heads and not, god forbid, subject to raids from ex-AIGers who'd left to trade against the company's book. Nah, they pretty much "threw in the towel," as Zero Hedge points out, and gave the "winners" on all those bad trades a chance to really earn their bonuses again.

But is the big payout the real shadowy force behind the recent runup in stock prices? Today's stock traders seem worried. Because even if reports that AIG FP has only unwound a quarter of its total trades are true, most investors agree the Treasury is too cash-strapped to do this forever.

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Topics: AIG, Goldman Sachs

Henry Paulson

Hank Paulson To Write Goldman/Bush/Credit Default Swap Tell-All

Moe Tkacik | March 26, 2009, 6:48PM

Hank Paulson has a book deal. And if there is demand in the marketplace for yet another score-settling insider account by a flawed but well-meaning Bush appointee, we guess it is Hank. Since the centimillionaire is generously refusing an advance and donating the proceeds to a hotline that helps homeowners prevent foreclosure -- an endeavor he did not have much time for as Treasury Secretary -- we'll put a copy on hold. But a Hank Paulson book is veritably guaranteed to disappoint, right? Or should we hedge that statement?

After all, Paulson is a competitive guy, and the "Bush Administration Treasury Secretary Tell-All" genre has formidable competition in The Price Of Loyalty, Ron Suskind's account of Paul O'Neill's tenure in that post -- plus Paulson has the advantages of having presided over the spectacular financial crisis that begat the current depression and Goldman Sachs. Paulson doesn't seem to have pent-up literary ambitions -- instituting the short selling ban was his equivalent to "burning books," he told the Post -- but he will undoubtedly submit himself to the editorial judgments of his daughter, a journalist who writes about public education. And in interviews, as his willingness to admit to burning books suggests, Paulson has seemed less of an ideologue than an ambitious business man who had never given ideology much thought -- so we won't be getting Ten Minutes From Normal here. (Although it would be awesome if he ripped off that title.)

On the other hand...

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Topics: Goldman Sachs, Henry Paulson

AIG

Is Probe Of AIG Bailout, Payments To Counter-Parties, In The Offing?

Zachary Roth | March 25, 2009, 2:48PM

Is the momentum building for an investigation into the real beneficiaries of AIG's latest bailout?

Earlier this month, the Treasury Department announced it was rescuing the fallen insurance giant yet again, bringing the total amount of taxpayer assistance given to the firm since last September to $170 billion. It soon became clear that much of that money -- over $49 billion, to be exact -- was going right through AIG to the counter-parties on its credit default swaps, both American banks like Goldman Sachs, and foreign ones like DeutscheBank.

Defenders of the move have argued that not giving the counter-parties this indirect bailout would have risked a wider financial collapse.

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Topics: AIG, Bailout, Federal Reserve, Financial Crisis, Goldman Sachs, Treasury Department

AIG

Wall Street To Washington: "I Want My Campaign Contributions Back"

Moe Tkacik | March 25, 2009, 1:33PM

Yes, that was an actual sentence spoken -- or more specifically "groused" -- by an anonymous Wall Street executive concerned for his "personal safety," though not enough to be dissuaded from attending or talking to a reporter at yesterday's Wall Street Journal 'Future Of Finance' Conference, where the future sounded like it had gone back in time and purchased a hundred billion dollars worth of extra credit protection, which is to say suspiciously like Finance Past.

It looks like Wall Street, no doubt emboldened by the recent 20% runup in the S&P 500, the fourteen bucks in matching leverage the government is offering them for every dollar they invest in toxic/"legacy" assets and the prospect of better-than-awful numbers at Citigroup and Credit Suisse, got its hubris back along with its proverbial groove. In the six months since it nearly triggered global financial Armageddon, the investment banking community has seemed, if not quite chastened, at least somewhat subdued amidst the nation's ever-heightening awareness that their industry engineered the ever-intensifying economic morass. But not anymore!

This morning the New York Times ran as an op-ed the resignation letter of one Jake DeSantis, a securities trader and executive vice president at AIG's infamous financial products division and recipient of one of those million dollar bonuses ($742,006.40 after taxes.) That's right: he's keeping it. And don't ask him if he feels guilty about it because he will tell you: NO.

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Topics: AIG, Federal Reserve, Goldman Sachs, Timothy Geithner, Treasury Department

Goldman Sachs

Government Sachs: TARP Funds Just The Tip Of The Iceberg For Goldman

Zachary Roth | March 24, 2009, 12:39PM

Goldman Sachs is planning to give back the TARP money it got last fall, "ideally in the next month," reports the New York Times.

The firm is saying it just can't handle the level of government oversight that comes along with the funds, especially amid the outrage over AIG bonuses. "It's just impossible to run our business in this environment," one exec told the Times' Andrew Ross Sorkin.

Sounds great.